Lending rise fuels housing recovery

Mortgage lenders have reported their strongest January since 2008 in further signs that the housing market revival is set to gather pace in 2014.

Around £15.5 billion worth of mortgages were handed out last month, a figure which has surged by one third compared with January 2013 when £11.6 billion worth of home loans were advanced, according to the Council of Mortgage Lenders (CML).

While January's figure is down 8% compared with lending levels in December 2013, the CML, which represents banks and building societies, said that seasonal factors are likely to have affected activity levels.

But it cautioned that some housing market predictions for house sales this year could turn out to be "over-optimistic", amid several reports pointing to a shortage of house sellers coming to market in some areas.

But he continued: "The Bank of England envisages that approvals may climb to 90,000 a month in the second and third quarters of 2014. This would seem to imply property transactions running at an annualised rate of one and-a-half million or so.

"We think this may be over-optimistic given the growing anecdotal reports of a shortage of prospective sellers."

According to HM Revenue and Customs (HMRC) figures, just over one million homes were sold last year across the UK.

Earlier this week, figures released by the Office for National Statistics (ONS) showed that house prices surged to another record high in December and now stand at £250,000 on average across the UK.

While the ONS said that London is responsible for a large part of the rising values, it also said that price growth is beginning to "increase strongly" in some parts of the country.

The Government's flagship Help to Buy scheme, which was launched last year, has significantly widened the availability of mortgages for people with deposits as low as 5%. More loans were handed out to first-time buyers 2013 than in any other year since the economic downturn.

But some experts argue that, while the scheme has helped to boost the supply of potential home-buyers, more should be done to increase the supply of properties on the market, which could help to calm house price increases in some areas.

Andy Frankish, new homes director at mortgage broker the Mortgage Advice Bureau (MAB), said the construction industry is in "far better shape than this time last year".

He said: "We can expect mortgage lending and housing supply to continue their recovery as 2014 progresses."

Communities Secretary Eric Pickles said the housing market is "clearly turning a corner".

He said: "This is further evidence of how Help to Buy is both helping aspiring homeowners get on to the property ladder and getting Britain building again, as developers are delivering more homes in direct response to this increased demand.

"On top of this, our efforts to cut the deficit have also kept interest rates low, ensuring home ownership is at its most affordable for seven years."

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